If the Keystone XL Pipeline gets permitted and built, prices of Wyoming crude would likely rise, a Washington, D.C.-based research analyst said.
That’s because additional pipeline capacity would free up the crude pipelines in Wyoming to haul local oil, said Trisha Curtis, the director of upstream and midstream research for the Energy Policy Research Foundation Inc. The organization studies energy economics and policy issues with emphasis on oil, natural gas and petroleum markets.
Curtis spoke last week in Casper at a meeting of the Wyoming Pipeline Authority, which promotes development of pipelines to enhance natural resource development in Wyoming.
The proposed 1,179-mile Keystone XL Pipeline would snake through the middle of the United States – the closest it ever gets to Wyoming is in South Dakota and Nebraska – to transport crude from Alberta, Canada, to the Gulf of Mexico. It has faced numerous regulatory hangups, Curtis said, and recently the five-year anniversary of not being permitted.
Wyoming has crude. It also has pipelines that haul crude from Wyoming and elsewhere, including from Canada, Curtis said.
But the pipelines that move crude from Wyoming are fully loaded, with 20-year contracts. If Wyoming producers increase production, it would be a challenge to find pipelines with capacity to move it, Curtis said.
The environment is called “constrained pipelines,” Curtis said. It’s one of the reasons Wyoming crude is sold to refineries at a discount — which the refineries don’t necessarily pass on to consumers.
Discounted prices result in lower revenue for the state, she said. They also result in lower profit margins for companies, which fall even more when there is a drop in world oil prices. Slim margins could evaporate and investment in Wyoming could halt, Curtis said.
“Right now, you have a system that has no optionality,” she said. “When you have another pipeline built, basically you’re giving another option for crude oil. So it allows more crude oil to flow through Wyoming pipelines.”
Although Keystone offers hope to Wyoming oil prices, Curtis has little hope for Keystone being approved. The government delayed key dates for when it was to review permits. Even if the pipeline gets approved, there will be lawsuits to stop it, Curtis said.
“I’m pretty pessimistic on it right now,” she said.